ALLCASTLE PRINCETON + UTC Fire and Security

Never Mind the Security, Feel the Fire.

Back in April this year we placed GE Fire & Security on our list of the top 50 potential acquisition prospects for 2017. This followed the decision that month for the sale of 81 percent of its Homeland Protection business to Safran, a French company known mainly in the security industry for its Sagem Securite business, for $580. At the time GE Security CEO and president Dean Seavers said the deal would allow GE Security to focus on its "core business": intrusion, access, video and transmission, key control, and fire and communications. However many watchers in the industry including Memoori had already decided that it would not be long before the remaining parts of the security operation would be up for sale. So the announcement last Thursday by Bloomberg News that GE Security is for sale, having hired JPMorgan Chase to find a buyer, was no surprise even to those without a crystal ball. So the biggest deal in the Security and Fire business for many years has now started.

The Blogs covering the security industry are quite dismissive of the quality of products and service of their security division and doubt that any of the majors would be interested unless it was at a fire sale price. The heritage estate would be the only attractive asset, whilst the products would just duplicate with no leading edge technology, is the claim being made.

However their Fire Detection business is a much more tasty morsel. Built around the Edwards System Technologies acquisition of $1.4 billion in March 2016, this is a well respected business having a significant market share in an industry that is more mature and far less fragmented than the security market. The opportunity to buy a Fire Detection business of this size and geographic coverage is unlikely to happen again for many years. It may not have the growth prospects of the security industry but neither does it have the hundreds of small innovative companies creating a constant need to develop new products.

We believe that the Fire Detection business will be key to the acquisition strategy that will unfold during the next few months. The last major fire business to be sold was Novar in 2016, completed 2016 and it has given the acquirer, Honeywell, the number 1 slot in Europe. The other majors in this business Tyco, UTC, Siemens and Bosch must have a real interest in this opportunity and will put up a stronger fight than last time. Significantly these companies are also major players in the security industry. If Schneider want to make a push into Fire Safety, this is the time and they will not be hampered by any monopolistic considerations.

The next few months will for sure see a flurry of interest and activity. This acquisition is complex because of its size and the number of different businesses making up GE Fire & Security and the current economic climate. A break up is likely to produce the best outcome for GE.

Bosch, Electronic Security Industry, Fire Detection Industry, GE Security, Honeywell, Sagem Securite, Siemens Building Technologies, Tyco, and more:

Never Mind the Security, Feel the Fire. + UTC Fire and Security